Hero Moto sales foretell improving sentiment in two-wheeler mkt

Hero MotoCorp may have proved the critics wrong in October, when it says it retailed more than 3.5 lakh two-wheelers in just 15 days, beginning 16 October. For the whole month, the world’s largest two wheeler maker dispatched the highest ever bikes and scooters at 5,29,215 units (5,12,238 units).

Hero has been under fire for some months because its flagship brand Splendour has seen a sharp decline in sales. The company announced an inventory correction in August and September and this exercise impacted the Splendour the most, followed by Passion.

This led to competition asserting that one of its brands had overtaken Splendour to become the world’s largest selling bike in September. Now, with such a huge increase in dispatches in October, Hero Splendour may have regained its numero uno position. The company did not disclose retail numbers for the Splendour. But unless Hero manages to sell all the bikes it has stocked up at its dealerships, it may again face the situation it was in when a similar aggressive dispatch programme led to unprecedented stocks at dealerships.

In a note to clients last week, Sahil Kedia and Rohit Goel of Barclays noted that Hero has lost over 500 bps or 5% market share in the September quarter over the June quarter. “Given the slew of launches by the competition and increased aggression from Honda Motorcycle & Scooter India (HMSI), we expect Hero’s growth rate to be lower than the overall two wheeler industry. We now forecast a volume decline of 6% for FY13 vs 6-8% growth for other players. In such a scenario, we expect Hero’s pricing ability to remain weak versus peers.”

Hero’s Senior VP (Marketing and Sales) Anil Dua is hopeful about robust sales this festival season. “With Diwali around the corner, we are prepared for even better retail sales in the month of November as well. We hope that the improved market sentiment will sustain itself as we go forward into the rest of this fiscal.”

Kedia and Goel have warned of a price war and increased discounts if demand for Hero’s bikes and scooters does not improve in the coming months.

Hero’s performance is a benchmark for the two wheeler industry since a large scale increase in dispatches by this company foretells an improving sentiment all round. Among other two wheelers, Bajaj Auto did not report its October sales numbers today, TVS Motor Company reported 4 percent higher two wheeler dispatches in October at 1,86,376 units.The company sold 72,687 motorcycles (75,652 units) while scooter sales were 43,973 units (47,445 units). Two-wheeler exports were 16,103 units, down from 20,119 units in the corresponding period of last year.